COVID-19 loss mitigation options for single family borrowers

The United States Department of Housing and Urban Development has issued instructions regarding loss mitigation options for covered single family borrowers that are in the CARES Act.

For borrowers experiencing financial hardship because of COVID-19 which impacts their ability to make mortgage payments on time, the mortgagee must offer a forbearance which allows for one or more periods of reduced or suspended payments without specific terms of repayment.  The mortgagee may use any available method for communicating with a borrower regarding forbearance.  The initial forbearance period may be up to 6 months.  If needed, the borrower can request an additional 6 months forbearance period.  The mortgagee must waive all late charges, fees, and penalties as long as the borrower is on a forbearance plan.  Any borrower granted forbearance and is otherwise performing as agreed is not delinquent for purposes of credit reporting.  This provision is effective immediately.

The CARES Act established the COVID-19 National Emergency Standalone Claim.  Borrowers are eligible if the mortgage was current or less than 30 days past due as of March 1, 2020, the borrowers states they can resume making mortgage payments on time, and the property is owner occupied.  If this claim is granted, the borrowers accumulated late fees are waived, and the claim only includes arrearages, consisting of principal, interest, taxes and insurance.  The mortgagee is also automatically granted a 90-day extension to the 6-month deadline for recorded mortgages.  All borrowers who receive a forbearance must be evaluated for the National Emergency Standalone Claim.  This program starts no later than April 30, 2020 but mortgagees can start it sooner.

The mortgagee must evaluate any borrower not brought current by a National Emergency Standalone Claim for other loss mitigation options.

These remedies do not affect the terms of the mortgage.

For Home Equity Conversion Mortgages, upon request of the borrower, the mortgagee must delay submitting a request to call a loan due and payable.  The initial extension period may be up to 6 months.  If needed, an additional 6 month period can be approved by HUD.  The mortgagee must waive all late charges, fees, and penalties as long as the borrower is in an extension period.  For loans that have become automatically due and payable, entered into a deferral period, or become due and payable with HUD approval, the mortgagee may also take an automatic extension for any deadline for foreclosure and claim submission for up to 6 months.  If needed, HUD can approve an additional 6 month extension.  (Mortgagee Letter 2020-06, April 1, 2020.)